Texas sues Xerox over orthodontic Medicaid claims

Texas Attorney General Greg Abbott has filed a lawsuit against Xerox, alleging the company wrongly approved hundreds of millions of dollars' worth of Medicaid claims for orthodontic services that were not medically necessary.

The 23-page civil suit was filed on May 9 in Travis County District Court against Xerox and its ACS Healthcare subsidiary to recover allegedly fraudulent Medicaid payments for orthodontic services that were approved by Xerox.

Xerox has served as the vendor responsible for reviewing dental and orthodontic claims submitted to the Medicaid program since 2003, according to a press release. Under Texas state law, orthodontic services are not generally eligible for coverage under the Medicaid program.

The suit emerged from a lengthy multiagency investigation into orthodontic Medicaid fraud. In June 2012, the attorney general's office, together with the Texas Health and Human Services Commission (HHSC) and the HHSC-Office of Inspector General, formed a dental and orthodontic fraud task force to investigate alleged fraudulent overbilling by dental and orthodontic Medicaid providers.

The task force's investigation found that Xerox had not been properly reviewing orthodontic claims as required by its contract with Texas, according to a statement from the attorney general. Furthermore, the task force found evidence that Xerox approved unauthorized claims.

"The task force uncovered evidence revealing that Xerox systemically approved orthodontic claims that were not authorized by state law," Abbott said in the statement.

Texas is seeking to recover Medicaid payments that Xerox approved for orthodontic services that were not medically necessary and therefore not authorized, according to the complaint. The suit also seeks injunctive relief, civil penalties, and restitution of overpayments made by the Medicaid program as a result of Xerox's unlawful conduct.

Xerox denied culpability and instead blamed the dentists who submitted the allegedly fraudulent claims.

"We have never engaged in fraudulent activity and always operated with complete transparency," the company said in a statement sent to DrBicuspid.com. "Unfortunately, this misdirected lawsuit focuses on Xerox rather than the dentists who took advantage of the program."

The complaint states that Xerox "permitted an unprecedented loss of Medicaid funds to predatory and unscrupulous dental providers," noting that Texas paid about $1.1 billion for orthodontic services to Medicaid patients.

Despite Xerox's repeated assurances that it was following state policies for properly evaluating claims by trained dental professionals, "Xerox was paid tens of millions of dollars for services it was, in fact, not performing," the complaint states. Xerox knowingly failed to adequately review the orthodontic requests and "routinely rubber-stamped" large amounts of claims "without proper review."

To qualify for orthodontic treatment, children must be older than 12 years and have a severe handicapping malocclusion, the complaint notes. The Medicaid program does not cover cosmetic orthodontics, and prior authorization of treatment plans is required.

Xerox assured Medicaid officials that "qualified clinical personnel would use their medical expertise to evaluate medical necessity and cost-effectiveness of requested services," according to the complaint. Xerox said every orthodontic claim would be submitted to a dental director for review, including a Handicapping Labio-lingual Deviation (HLD) scoring sheet, radiographs, photos, and casts of patients' teeth.

Instead, Xerox instructed its dental personnel to "automatically" approve claims for Medicaid children who had HLD scores over 26 points. Employees who processed the claims had "no qualifications" to evaluate medical necessity and lacked the training to review HLD sheets for "obvious overscoring," the complaint states.

The procedure "drastically" reduced the claims that were reviewed by the company's dental director, who was the only one medically qualified to properly review the claims, according to the suit.

Only about 10% of the claims were reviewed by the dental director, who approved the "vast majority"; in many instances, the director "knew the patient did not meet Medicaid policy requirements," the complaint states.

As the number of claims increased, Xerox employees were instructed to approve applications for children younger than age 12 without dental director review, the complaint notes. Despite reports by Xerox employees to their superiors that claims were being approved without the necessary review by the dental director, Xerox made no changes to the review process, the investigation claimed.

A 2008 audit by the HHSC Inspector General questioned whether Xerox was meeting policy guidelines for Medicaid claims. From September 2007 to February 2008, Texas paid $52.6 million for orthodontic care, according to the complaint.

The question remains: Why did HHSC renew the Xerox contract in 2010 after the audit found questionable practices in the claims process?

The state Health and Human Services Commission announced that the state was terminating the company's $168 million contract "after Xerox staff approved thousands of requests for braces that weren't medically necessary."

"Xerox failed to perform the medical reviews that our contract required and taxpayers deserved," HHSC Commissioner Kyle Janek, MD, said in an emailed statement. "Dentists were putting braces on children who clearly didn't meet the Medicaid standard for that care, and Xerox didn't have the processes in place to review those cases before paying them."

HHSC also said it will break the large contract into as many as five contracts "to make it easier to take action against a vendor without disrupting medical care for people with Medicaid."

Texas has been rocked by allegations of fraud by dentists and orthodontists accused of bilking the state Medicaid program out of tens of millions of dollars. An Office of Inspector General investigation found $6 billion in fraud and waste within Medicaid from 2004 to 2011.

A report by HHSC revealed that in 2010 Texas orthodontists charged Medicaid as much for services as the rest of the U.S. combined. In addition, the Texas Medicaid and Healthcare Partnership, headed by ACS and tasked with evaluating and approving claims, was rubber-stamping them, according to the report.

In 2009, Texas spent 72% ($145.4 million) as much as the entire U.S. ($210 million) on Medicaid orthodontics. In 2010, Texas spent $200.8 million on Medicaid orthodontics for 80,000 children; more than 18,000 were children younger than 12, who usually don't have their permanent teeth yet.

Between 2008 and 2011, the state spent $705 million on Medicaid orthodontics. The state is now holding payments back from 91 Medicaid providers, including dozens of dentists and orthodontists, for credible allegations of fraud.

The attorney general's office has recovered more than $1 billion from Medicaid fraud investigations over the past 10 years, including $1.8 million in dental Medicaid fraud. But dozens of investigations into alleged fraud at dental offices are ongoing.